Malaysian firm to buy Saudi Telecom stake in Axis

Kuala Lumpur, September 26, 2013

Malaysia's Axiata Group will buy Saudi Telecom's Indonesian unit, boosting its presence in Southeast Asia's largest economy and hastening further consolidation in its over-crowded telcoms sector.

The sale of a majority stake in PT Axis Telekom Indonesia (Axis) is also likely to help STC end a tussle with global banks over a $1.2 billion loan tied to the Indonesian firm.

Axiata told the Malaysian stock exchange on Thursday the purchase, which is being handled by its Indonesian telecoms subsidiary XL Axiata Tbk, will unlock additional spectrum capacity.

It did not disclose the value of the deal, but said Axis has an enterprise value of $865 million.

The deal supports the Indonesian government's push to consolidate the telcoms industry, where several players, including Axis and PT Bakrie Telecom Tbk have struggled to pay off debts and maintain positive margins.

The acquisition now leaves around nine mobile operators in a market where mobile penetration reached 115 percent by end-2012.

Shares in XL Axiata Tbk, one of many Southeast Asian units of Axiata, jumped more than 4 percent and outperformed the wider Jakarta market after the deal was announced.

"XL is committed to investing in the next generation of mobile technologies and to bring back the broader industry ecosystem to healthier economics," XL Axiata President Director Hasnul Suhaimi said in the company statement.

RELIEF FOR SAUDI TELECOM?

STC, which had an 84 percent stake in Axis, said in a statement that it had recorded a realised loss of 705 million Saudi riyals ($187.99 million) for its Indonesian investment in the second quarter of 2013.

The final impact of STC's financials will be determined once the Axis deal is concluded, it added.

Based on a 100 percent enterprise value of $865 million, the Axis sale would repay just part of the $1.2 billion loan STC had taken in 2011 to finance the Indonesian firm's expansion.

STC had sought to restructure the loan after a change in management, but bankers said the company was obliged to honour it in full, which it refused to do, sources have told Reuters.

The banks, led by Deutsche Bank, threatened to sue STC. The loan was structured under English law which means the banks could pursue legal options outside Saudi Arabia if need be.

HSBC, Citigroup and China Development Bank also had exposure to the loan, the sources said.

The loan also included a $400 million facility for equipment purchases from China's Huawei, underwritten by China Development Bank, and a $350 million facility for equipment purchases from Ericsson, arranged by HSBC and backed by EKN, the Swedish Export Credit Agency. - Reuters